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According to a Wall Street Journalreport tonight, "[t]he online-video service has been at odds with Verizon Communications Inc. and other broadband providers for months over how much Netflix streaming content they will carry without being paid additional fees. Now the long simmering conflict has heated up and is slowing Netflix, in particular, on Verizon's fiber-optic FiOS service, where Netflix says its average prime-time speeds dropped by 14 percent last month."

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One possible interpretation of the above statement is that Verizon has been demanding direct payments from Netflix in exchange for carrying any video traffic beyond some numerical limit. That's probably not precisely what's happening, however, because the report says this particular dispute has been simmering for months—meaning it started before the court decision last month that overturned the Federal Communications Commission's net neutrality rules. Prior to that court decision, it would not have been legal for Verizon to refuse to carry Netflix traffic when its payment demands weren't met.

However, there are other ways Verizon can play hardball and affect Netflix performance. Netflix has been pushing ISPs to host its caching equipment within their data centers and to peer directly with the video provider—that is, exchange traffic without a third-party intermediary.

"Netflix wants broadband companies to hook up to its new video-distribution network without paying them fees for carrying its traffic," the Journal noted. "But the biggest US providers—Verizon, Comcast, Time Warner Cable, and AT&T Inc.—have resisted, insisting on compensation."

ISPs are under no obligation to accept Netflix's peering and caching offers. Teaming up with Netflix might improve performance for consumers, but not doing so isn't the same as refusing to carry traffic. If Verizon's network and its interconnections with third-party networks are strong, Netflix quality should be reasonably good.

The biggest problem is probably the same one we've seen in previous disputes: the connections between ISPs and the Internet bandwidth providers that Netflix pays to distribute its traffic to the rest of the Internet.

As we've reported before, those bandwidth providers, such as Cogent Communications, have traditionally exchanged traffic with consumer ISPs without money changing hands. But ISPs are using increases in Netflix traffic as justification to demand payment.

When negotiations stall, Verizon could put pressure on Cogent by delaying equipment upgrades needed to add capacity to links that have become congested. Cogent accused Verizon of doing just that last June, and it seems it may be happening again.

"People familiar with Cogent's and Netflix's thinking say the cable and telephone companies are delaying upgrading existing connections," the Journal reported. "Executives at major broadband providers, meanwhile, privately blame the traffic jam on Netflix's refusal to distribute its traffic more efficiently. ... Neither side is budging, people familiar with the matter said, leading to growing congestion."

The report noted that "Verizon has a policy of requiring payments from networks that dump more data into its pipes than they carry in return. 'When one party's getting all the benefit and the other's carrying all the cost, issues will arise,' said Craig Silliman, Verizon's head of public policy and government affairs."

Netflix traffic being sent from Cogent to consumer ISPs has reportedly increased in the months since Netflix started offering its so-called "Super HD" streams to all customers, rather than just customers of ISPs who have partnered with Netflix.

"Within the past four to six months, Netflix traffic through Cogent's connections to one major broadband provider has at least quadrupled, one person familiar with the matter said," the Journal reported.

Netflix declined to comment on financial disputes with Verizon.

Cogent told Ars that "this is a continuation of the same dispute" that we wrote about last June. A Verizon spokesperson called this latest news a "replay of the longstanding issue you guys covered a while back."

I can see both sides of this argument. The whole reason they're called "peering agreements" is because both sides are supposed to be peers, as in roughly equal. That means they're sending and receiving a roughly equal amount of traffic. That's obviously not the case here. On the flip side, ISPs need to make sure their customers are getting what they're paying for.

It's going to be tough for a while, and the only way I can see this getting resolved is Netflix paying up and passing the costs on to their subscribers. Net Neutrality doesn't enter the equation here.

No, no, no, no, no!

That argument had meaning only when the internet was young and business/academic based, not in the internet of the past ten years.

There _is_ balance. Verizon has ZERO content to offer to the rest of the internet, and the rest of the internet has everything that is desired by the Verizon customers. The balance is not one of byte-per-byte but one of supply-and-demand.

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I can only imagine how postal services would be like if they worked on Verizon's logic. FedEx and UPS arguing that anyone receiving goods should have to pay a subscription fee from them, and the senders should also pay them to deliver it.

Isn't this already the way mobile calls work in the US? Sender and receiver both pay if both are mobile phones? Maybe they see how easily mobile providers managed to dupe customers with that (don't think any other countries have this - caller pays everywhere else I've been) and thought they could do the same with data.

I can only imagine how postal services would be like if they worked on Verizon's logic. FedEx and UPS arguing that anyone receiving goods should have to pay a subscription fee from them, and the senders should also pay them to deliver it.

Isn't this already the way mobile calls work in the US? Sender and receiver both pay if both are mobile phones? Maybe they see how easily mobile providers managed to dupe customers with that (don't think any other countries have this - caller pays everywhere else I've been) and thought they could do the same with data.

The slight difference there is that the Caller is paying for a call to a landline service. The recipient is paying for the mobile proportion of that service - the extra special delivery option.

With the North American number plan is is only fair... The caller has no way of disconcerting immediately that a phone number is a mobile number, rather than a landline, at just a glance.

In the rest of the world, where mobile numbers are given a specific number range, the issue doesn't arise (except where non-mobile-but-extra-special-high-charge numbers look suspiciously like Mobile numbers).

They already get paid for that traffic....by their customers that request that traffic.

Just declare these fools, and those like them, as common carriers, or make the last mile open for all since it was largely funded by tax payer money and public right of ways. Lets see what some actual competition can achieve.

I can only imagine how postal services would be like if they worked on Verizon's logic. FedEx and UPS arguing that anyone receiving goods should have to pay a subscription fee from them, and the senders should also pay them to deliver it.

Isn't this already the way mobile calls work in the US? Sender and receiver both pay if both are mobile phones? Maybe they see how easily mobile providers managed to dupe customers with that (don't think any other countries have this - caller pays everywhere else I've been) and thought they could do the same with data.

The justification was that mobiles were not restricted to their own networks so there was no way of separating mobiles who pay for the connection from landlines that get a "free" connection. So the companies solved this by charging for "connection" to the network for all mobiles so that they received payment even when the call came from a landline that was paying "nothing" for the call.

In fact, the various small phone companies that managed to do business through the long years of the Bell monopoly and then the Baby Bells after the breakup billed each other for traffic that crossed over to another company's customer. It is just more profitable to charge the originating network for routing the call and then charging the phone subscriber for terminating the call.

The landlines pay a flat rate for unlimited service or a metered rate depending on contractThe mobiles pay a flat rate for unlimited service or a metered rate depending on contract* The subscriber paid their phone company & the phone company pays for traffic that exits the network* Because a call that is terminated is being paid for by the originator of the traffic, the recipient only has to pay the cost of terminating the call ... perfectly sensible

The marketing and lobbying departments earned their paychecks when this was approved.

I know I rarely answer the phone when I do not recognize the number. This is behavior that minimizes paid use of airtime and is of benefit only to those companies selling "unlimited" minutes because it trains people to keep usage of the phone to a bare minimum. The companies that would benefit from people answering calls from unknown numbers are the same ones who are training their subscribers to avoid doing so in order to reduce expense

Exactly, they don't even try to balance the load at all. Historically, Netflix has attempted to extract as much value as possible out of all of its business partners, and that's why they lack so many movies and shows that their competitors have. The peering issues are just another symptom of the same disease.

If you notice, Amazon Prime Streaming has almost exactly the same content as Netflix Streaming (other than their original programming, obviously). I have both, and nearly every single time that I can't find a movie or show one, I look at the other, and they don't have it either.

I'm pretty sure that this has far more to do with the studios than anything else. Otherwise, how would the two providers have nearly the same content?

Sorry, but I've had both for years. And out of thousands of titles, finding a few is hardly "significant." Are they exactly the same? No. And I didn't say they were. I said that they were nearly exactly the same. Which they are.

Practically all of Stargate the series. The Mask, Galaxy Quest , Contact, The Fountain, Escape from New York, Beetlejuice, Ocean's 11, The Magnificent 7, Wayne's World, Interview with a Vampire, Superman (1978), Fiddler on the Roof, The Lost Boys, Amnityville Horror, Babel, Little Shop of Horrors, North by Northwest, The Exorcist(1973), Crouching Tiger Hidden Dragon, The Firm, El Dorado, The Witches of Eastwick, 12 Angry Men.

No one has said they are identical. However, they both carry tens of thousands of titles, most of which they hold in common, and the plural of anecdote is not data. If you really want to show there's a disparity, find a complete list of what titles they do and don't have in common, then tell us what the percentages look like.

Correct me if I'm wrong, but don't ISPs get paid by the people downloading the content? Having been paid once for every bit they transfer, why on earth should they be paid again by the people uploading that content? They're just trying to get away with double-dipping, it seems to me.

I think in this argument, Verizon are being a bit childish, they are a Tier 1 internet provider, which means most people pay them for transit, they rarely if ever pay anyone else, and they have a global presence.

This means that their entire core network is based on peering, they have no upstreams in the usual sense of the word.

Yes peering is meant to be mutually beneficial, but since when is giving your customers who do pay you for a service what they want not beneficial? Are they that arrogant that they think they won't lose business by refusing to play ball?

On the other hand, no they probably won't because they are a tier 1 ISP, so all they really pay for is their equipment upkeep and staff, whether netflix is a direct peer or a hop or two away is meaningless.

TLDR; Verizon as a tier 1 ISP hold all the cards here, they basically want netflix to pay for their expanding infrastructure when really they should get with the times.I know new equipment isnt cheap be it a chassis, a line card or just a damn optic, but in the grand scale of things, I think Verizon makes enough money to cover the costs of expansion, how about you grow up and stop trying to push your expenses on others.

Edit:Oh also, Netflix will be paying "someone" for upstream, and that is how the internet works. If that someone is a peer of Verizon, then tough shit, Netflix have paid for their upstream and Verizon need to deal with it instead of throwing their toys out of the pram.

Correct me if I'm wrong, but don't ISPs get paid by the people downloading the content? Having been paid once for every bit they transfer, why on earth should they be paid again by the people uploading that content? They're just trying to get away with double-dipping, it seems to me.

Or is Netflix streaming data ...elsewhere?

Nope. That's about the size of it. They fought for years to have net neutrality overturned so that they could make more money by double dipping, and even better, without net neutrality, they can legally censor anything they like by refusing to allow anything they disagree with, or are payed to disagree with, over their lines. This effectively puts them in the position of gatekeeper, a great firewall of the US for hire. Want piracy sites of the web? Show me the money. Want a political opponent's message out of the way? Just sign here.

And this is exactly what happen when you are in a monopoly-type scenario.Many people can only use Verizion because it's the only provider in their area, thus, Verizon can set whatever policy they like because the pain of switching is always greater than accepting the BS of the day.

I prefer much better the Japanese system. The telco (NTT) is just the dumb pipe that bring ADSL/Fiber Optic and Cable Modem to your home, and on top of that you choose the provider of your choice.If, for some reason, you want to switch provider ALL you have to do is to make a new contract with one of the hundreds available, change the login on your router and you're done.

Nationalizing the infrastructure is a much better way to go. The Internet is too important for the economy to be left in the hands of some companies that allow only selected traffic to go thru.

And this is exactly what happen when you are in a monopoly-type scenario.Many people can only use Verizion because it's the only provider in their area, thus, Verizon can set whatever policy they like because the pain of switching is always greater than accepting the BS of the day.

I prefer much better the Japanese system. The telco (NTT) is just the dumb pipe that bring ADSL/Fiber Optic and Cable Modem to your home, and on top of that you choose the provider of your choice.If, for some reason, you want to switch provider ALL you have to do is to make a new contract with one of the hundreds available, change the login on your router and you're done.

Nationalizing the infrastructure is a much better way to go. The Internet is too important for the economy to be left in the hands of some companies that allow only selected traffic to go thru.

That is incorrect.

Living in the UK we have a similar system where a supposedly neutral arm of BT (British Telecom) called Openreach is charged with the responsibility of being a "neutral" entity to manage most of the telephone and fiber infrastructure.

Despite being carrier neutral, they are still a monopoly. I don't really like being charged £150 ($250) for a line activation/install. Considering that if the line is there already they don't actually even need to do anything except maybe patch the pair back in again which involves all of what, 5 minutes in the patching cab and 5 minutes testing that the the signal works form the socket in the house?

It also means that anyone who has an active phone line for the internet, be it FTTC (which is actually just vdsl to the cabinet) or adsl all the way to the exchange. This clocks in at around £14($23) per month.

So there you have it, if you want basic internet in the UK, you need to pay a setup cost and a monthly rate to use the line on top of the cost of your actual phone and/or internet contract.

It's kind of a damned if you do, damned if you don't scenario. Nationalizing the system creates carrier competition, but gives a monopoly to the people installing it. It also means you rely on one company to support an entire infrastructure, and they get paid either way, so they don't have the same responsibility to their customers. For example, an install via Openreach can take 2 weeks, and depending on the type of install and state of preivous installations, that might just be the site survey date, not the install date. Whereas, correct me if I'm wrong here, I feel that it's in a carriers best interests to get you connected quickly so you can start paying bills.

So yeah, i'm not convinced that a nationalized infrastructure if the best way forward.

Also, NTT is another huge Tier 1 ISP, so even though they may only provide the pipe, they probably don't care who the carrier is because they will be transit customers of them anyway.

the current ISPs are in the wrong market. they have nothing that we want except the key. that said, there's absolutely no incentive for them to keep keep the internet awesome.

what we really need is for internet types to become ISPs. let the people that stand to make money on the inside control the doors.

(or ideally, which means "never gonna happen" put internet access under the government and treat it as a utility that should apply to everyone. i'd love this, but would fear that it would get majorly screwed up in short order)

It's more likely that users would switch from Verizon to another ISP than they would drop Netflix if they have a choice of ISPs. Since I don't subscribe to Netflix, I'm primarily using mobile data. At work I can use Wi-Fi.

Perhaps Netflix should charge Verizon for the privilege of delivery of Netflix's content, otherwise Verizon's ISP service may go the way of their land line (phone) service.

Verizon is able to do this as it is a regional monopoly. Most of its users do not have another choice of ISP.

If they did, they would switch. Verizon has its captive people wanting Netflix. Verizon is holding them hostage and demanding payment from Netflix to free its hostages.

This is about abuse of monopoly status, nothing more. Any company would do the same as Verizon in this situation, as a company's first, second, third, nth and last responsibilities is, always havebeen, and always will be to deliver profits.

Seems to me Verizon is playing a game of Dumb Pipe Obstructionism and Extortion.

High time for that company and its peers to be broken off from content, relegated to distribution, forced to swallow the bitter pill of true net neutrality, and heavily regulated like the public utilities that they once were and still are.

I need to read all the legal malarky connected to my agreement to the ISP.

I'm pretty sure there's a "from the bottom up" angle (IE, class action against the ISP for failing to deliver services specified in the contract), if the contract I have with my ISP isn't completely weasel infested.

(Sadly, I think most contracts to provide services these days are overstuffed with weasels. So maybe not. But I can dream, can't I?)

And the Internet decision-makers will represent the ultimate in ignorance. Netflix, if they are using parallel peering with this ISP, should stop and force Verizon to use a third party Tier-1 interconnect and thus remove any direct relationship with Verizon.

If Netflix and Verizon isn't conducting parallel peering then Verizon can go f&ck itself since there isn't a direct relationship. The whole concept behind parallel peering is for both the ISP and content provider to skirt the Tier-1 interconnect providers (e.g. Level 3, Cable & Wireless, etc.) fees as a mutual savings.

PURE greed on the part of the ISP and their continued unwillingness to build out their infrastructure to meeting the demands of their CUSTOMERS is the only thing at play here, but lobby away Verizon as the goons and thugs you are. BTW, this also goes for the likes of AT&T and Comcast, too.

Remember: when Verizon or some other broadband-provider in USA says something, you need to interpret it with the knowledge that they hate you, their customer. They will treat you with as much contempt as possible.

They already get paid for that traffic....by their customers that request that traffic.

Just declare these fools, and those like them, as common carriers, or make the last mile open for all since it was largely funded by tax payer money and public right of ways. Lets see what some actual competition can achieve.

Actually, at this point, it'd probably take both, to make a difference in their attitude.

PURE greed on the part of the ISP and their continued unwillingness to build out their infrastructure to meeting the demands of their CUSTOMERS is the only thing at play here, but lobby away Verizon as the goons and thugs you are. BTW, this also goes for the likes of AT&T and Comcast, too.

They don't need to lobby. There are no laws on the books regarding peering. There is only laws against blocking content and they aren't doing that. Don't understand why people use net neutrality as some kind of umbrella term, when it's very specific. Two subnets interconnecting does not equal content in anyway shape or form, nor are two subnets an Internet.

So Netflix current business model is not sustainable. Boohoo, I'll have a tear in my eye when I see my monthly bill and I have to pay to reach the same customers....you know the ones that already paid Verizon for the bandwidth.

But Netflix' model is sustainable. They pay their ISP for bandwidth. Customers from Verizon pay Verizon to get them the data they request. Verizon and Cogent have deals in place regarding bandwidth. If Verizon has a problem, they should take it up with Cogent. Maybe that would eventually mean Cogent would have to raise prices on Netflix, but I doubt it, since if Verizon had the market power to negotiate a better deal they would have already. Verizon just wants two bites at the apple.

Didn't netflix offer to install content caches within verizon's network on their own dime? IE, this has nothing to do with netflix trying to get a good deal, that's about as generous as you could reasonably expect.

This is just US ISPs having regional monopolies and knowing they can exploit them with impunity - they're the only way netflix etc can access their userbase since it's not like said users actually have any choice. It's just rent seeking because well, why not.

The Comcast/TW merger illustrated this hilariously - that they can actually say there's no area they both serve and thus the merger doesn't affect competition (since they're not competing anyway). Absolutely zero overlap between the two largest ISPs? Seriously?

Also remember Verizon's lines, the core of its network, were heavily subsidized by the US government. So don't pretend that being entirely hands off would be the appropriate thing to do, to let the market be as it should be. The government already helped (necessarily) set up the natural monopoly. Now it needs to recognize the monopoly and the absolute utility it provides and make internet connectivity a utility. One that isn't allowed to throttle, block, or HTML inject ads as it sees fit.

The government subsidizes POTS service. The government does not subsidize cable television or Internet access service (on the latter: it has not up to now subsidized broadband service but that will soon change).

This is when the government needs to step in and put an end to this bullshit and make them dumb pipes as they should be. I'm already paying for the bandwidth, it doesn't matter what goes through. This needs to stop, seriously.

I find it useful that Verizon is not letting any time pass between the court ruling and going full retard. That way is easier to connect the two things and maybe the US can get some sane legislation on the matter.

Has anyone actually read their Terms of Service agreement from their ISP?

You are not buying a full 15/20/50 Mb/s pipe, You are buying access to the internet with *speeds up to...* the advertised bandwidth.

I think if you were to take it to court, verizon could show that you can get the "advertised" speed to 99% of the internet, and just becuase netflix is slow dosn't mean verizon is cheating you.

Ars has been pretty good at writing alot of technical articles diving into how comlicated the internet is, but, they have not been diving too deep into the cost side of things. How much does it actually cost to route traffic from one place to another? How many routers? how much eletricity? how many simultaenous "superHD" video streams can 1 router route?

Neither Netflix nor the users are to blame if data transmission happens to blow a hole in Verizon's little trick of overselling bandwidth, just like most other ISP do. This practice needs to dissapear.

You can't afford an Internet connection that isn't oversold in your home, and neither can 99.99% of consumers. Overselling isn't bad in and of itself, and this issue is actually unrelated.

Overselling is still part of the problem. They sold 50 Mb lines, but can support all of their customers using 5Mb at the same time

The report noted that "Verizon has a policy of requiring payments from networks that dump more data into its pipes than they carry in return. 'When one party's getting all the benefit and the other's carrying all the cost, issues will arise,' said Craig Silliman,

This would seem like a reasonable policy *provided* that Verizon charges solely based on the amount of bandwidth used and not what the bandwidth is used for. Is there a way to guarantee that the prices are not influenced by the identity of Cogent's customers?

Am I the only one who hasn't had issues with Netflix on Verizon? I feel like people are constantly talking about poor quality or studding, but I almost never experience those things. Occasionally the video stops for a moment, but maybe once or twice a month. Am I just the luckiest guy in the world?

Edit: FYI, I tested with and without a VPN. I had no difference in Netflix streaming. Thanks for the downvotes!